bernanke-raises-rates

After hours the Fed released that they are increasing rates from .50 to .75, which caused a sell off to start and will most likely continue into tomorrow morning.  But, trading tomorrow will be risky if you are thinking that we will tank into the close.  That may not happen, as they aren’t in the habit of giving you your money… they like to take it instead.

I fully expect the market makers to close it around 109-110 by the end of the day, as they don’t want to lose money by paying out money to the option holders that have puts.  I’m expecting early morning selling, and then a grind back up to 110 by the end of the day.  The key time frame is 9:30 am to 11:00 am, and that should mark the low of the day tomorrow.

On another note, I was able to see a fake print of 107.38 spy on the 10 minute charts, which I added to yesterday’s post.  This might be the place that they are planning to take the market to soon.  When, I don’t know?  I don’t think that will happen tomorrow, as we have too much support right now.  But, you should keep that target on your mind for when we do finally sell off.

So, tomorrow the key will be to watch for the selling volume to die off early in the morning, and get out of your shorts.  If we sell off to 107.38 tomorrow, I’d be shocked.  The market isn’t ready to rollover yet folks.  We still need another week of choppy trading to set up a big bear flag on the weekly chart of the spy.  I do think we will put in the high for the market next week, before the large wave 3 down occurs.

As most of you know I make a really bad trade about a week ago and took a beating with some 106 puts I bought that will expire worthless tomorrow.  That’s one of the reasons I try to think a little clearer this time.  So, knowing how manipulated this market is I fully expect the sell off tomorrow to be bought back up.  The news out tomorrow is the PPI and CPI… which you can guarantee will be positive.  That’s the perfect way to raise rates (which the market won’t like, and will be negative), is to add good news in with the bad news.

Timing is everything here folks, and they ain’t stupid.  When they are really ready to tank this market, they will release nothing but bad news.  Right now they are still trying to hold the market up, so they will mix them together to have everyone’s head spinning.

So, for the bears… you have a chance to save yourself tomorrow.  If we hit 107.38 (not likely), you had better bailout of all shorts!  The daily charts are still pointing up and won’t rollover until next week.  I really think they want too go tag that 1127.38 gap (spx) that Sundancer pointed out.  I have the 112.00-112.50 spy area as major resistance, which is just a hair below the 1127.38 spx level.  I would estimate that to be about 113.00 on the spy, as it trades a little higher then the spx.  If anyone knows how to convert those two, please let me know.

Remember, nothing ever goes exactly as planned.  I’m getting better at this, but I make mistakes too.  Sundancer has again been of great help in informing us of the key levels that the market wants to go to.  There is also someone else I want to shout out a big Thank You too, and that’s…

Anna over at Hot Option Babe (her free blog) and Options Black Board (her subscription service).  I have learned so much from her about the market, and how to trade options, that I wouldn’t have made it this far without her.  She is a personal friend to me, as well as a mentor.  Yes folks, I do subscribe to some paid services, and her service is the best.  The banner I have on the right side of this page isn’t a Google Ad… it’s put there by me, because I highly recommend her service.

So, if you can’t day trade, but would like to learn how to swing trade options… go sign up, as it’s well worth your money.  Just take the trades that she does, and you will be happy that you did.  She is one of the best traders I know… seriously folks, no kidding aside.

Of course I can’t post her trades here, as that information is for the subscriber only… I can tell you that she gets a large percentage of them correct.  I’m not going to claim a percentage on her behalf, but from my point of view, I’d estimate she’s 75-85% correct on her calls.  Remember, that’s what I see… and not what she’s claiming.  On the one’s she gets wrong, she more then makes up for those loss with profits from the others.

Moving on…

I’m torn on what to expect next week, as I see both bullish and bearish sides to the argument.  I think we should start to head down soon though, so I’ll just try to piece that together on my weekend post.  Let’s just get through tomorrow first… OK?

So, timing is everything tomorrow.  The support levels on the way down are at 110.35 (but we are already below that after hours), 109.60-109.70, then 109.00 for gap fill from 02/04.  After that is the 108.00-108.40 area, which is the gap from 02/16, and finally the 107.38 level.

I really don’t think they will take it all the way down to 107.38 tomorrow, but it is possible.  If they do… again, get out of all shorts.  This market isn’t ready to roll over yet.  Next week is a different story though.  The current pain is still at 109 tonight, and I will update you with that information should it change tomorrow morning.  I do believe they will close this market where it makes them the most profit.  Whether or not this current pain number is accurate or not, I don’t know.  I suspect that the 110 level is the real number… not 109, but regardless of where it is, I’m not expecting a huge crash tomorrow.

Let’s all try to stay in this game until we see what next week bring us.  I suspect they would like to close the month out good, and hit their key levels first… before tanking it.  Next week will bring a lot of whipsaw action as the bulls and bears fight it out.  I’m going to try and stay out of their way, what about you?

Red